1. Public Education: 2019 General Session Preview
Representative Brad Last
January, 2019
Bradley G. Last, Representative [District 71]
Utah Legislature, January 2018

2. Funding & Enrollment History
10 Year Change
(FY 2010 to FY 2019)
State Sources (GF/EF)
$1.3 Billion
Total (All Sources)
$1.65 Billion
Enrollment
96,755

3. 2018 General Session State Budget: Allocation of New Discretionary Funds
FY 2018 & FY 2019
$806 million from State Funding Sources
35% to Public Education
$279.8 million

4. State Budget: Expenditures from State Sources by Category
FY 2019
$6.4 Billion from State General, Education, & Uniform School Funds
9.0% Increase from FY 2018
About 50% to Public Education (Portion of 8% Transfers/Other to Public Education Programs)
Focusing only on state tax dollars, Public Education is by far the largest recipient:
$7.3 billion from General, Education, and Uniform School Funds in FY 2019
An Increase of 9.0% over FY 2018
Public Education receives approximately 50% of state fund appropriations
Transfers/Other Includes Transfers from Basic Program to Restricted Accounts
$75.0 m SB 97 Funding, $65.2 m Teacher & Student Success, $36.1 m Equalization, Education Rainy Day Transfers, etc.
Range is between 46% and 51% in past 5 years

5. ***$200 m to $300 m of this is ABOVE TREND***
Available Revenue
(in Millions)
One-time
Ongoing
General Fund
$67
$187
Education Fund
$579
$488
Total
$646
$657
That ongoing amount - $7.1 billion GF/EF – that’s where we start our budgeting. We call it the base budget.
That’s not to say we don’t scrutinize the base – we do – and that’s our primary function – oversight.
We also have the opportunity to add to or subtract from that base.
You’ve probably heard people saying Utah has a $1.3 billion surplus.
First off, it’s not “surplus”. It’s a combination of surplus and projected growth. Only $158 million of it is truly surplus in the sense that it’s money in-hand that we collected last year but didn’t appropriate.
Second, it’s not really $1.3 billion – it’s $646 million one-time and $675 million ongoing. The $646 million is last year’s true budget surplus plus an increase in current year estimates plus above-trend future revenue. The $675 is expected growth on that $7 billion base between July 1, 2019 and June 30, 2020.
Third, there are many, many demands on this money, so in that sense it’s not “extra” – not “surplus”. In fact until last month, we were going to go borrow $350 million for the prison because we didn’t have money for it.
BASE BUDGETS
For those of you who have been through this before, we’re doing something a little different this year.
Rather than doing base budgets the first two weeks then building blocks the next two, we’ve asked subcommittees to review budgets line-by-line over all eight meeetings.
We’ll still pass base budget bills, but there will be no substitutes this year. Base budget bills are placeholders. Any upward or downward revisions to base budgets would come in subsequent appropriations bills.
This seems like a good time to remind everyone that the new money on this slide is NOT our biggest concern. We should be scrutinizing the entire $16.8 billion all-sources budget.
We ask that you take renewed interest in your oversight role throughout appropriations meetings.
To that end, we’ve handed out these blue cards that list good questions appropriators can ask in budget meetings. These are logical questions that you probably ask anyway, but it doesn’t hurt to have them written down as reminder.
***$200 m to $300 m of this is ABOVE TREND***
4/27/2019

6. Great Recession (Dec. ‘07 – June ‘09)
Utah Revenue Changes
Lehman
You may have read in the Taxpayers’ Association newsletter that those of us who have been around a while feel these revenue estimates are eerily similar to December of 2007 – when we were in the Great Recession but didn’t yet know it.
(click) This first bar shows the year-end surplus in September In September of 2018 it was $252 million.
(click) The next two bars show our December 2007 revenue estimates – almost $1 billion combined. I just told you that December 2018 was $1.3 billion.
(click) In February of 2008 we revised down our revenue estimates by a combined $240 million – but we were still positive by about ¾ of a billion dollars.
(click) Until September, when we had to revise down again.
(click) Then came Lehman Brothers – and we knew we were in a recession.
(click) But the recession had started nine months before we realized it.
(click) Things got worse the following December
(click) And again in February of 2009
(click) Until they evened out the next cycle (December 2009)
(click) On net, revenue was flat during the 2009 General Session.
We’re not necessarily predicting a recession today, but like December 2007, we believe this level of revenue growth is unsustainable.
Great Recession (Dec. ‘07 – June ‘09)
4/27/2019

7. Available Revenue (in Millions) One-time Ongoing General Fund $67 $187
Education Fund
$579
$488
Total
$646
$675
December Special Session
Prison Construction
($125)
($110)
Balance Available
$521
$565
One good thing to do with “bubble” revenue is to pay-down bonds or at least avoid going further into debt. As a Legislature we did exactly that on December 3.
Senate Bill 3001 appropriated $125 million one-time and $110 million ongoing over two years to cash-fund almost all of the remaining known costs of prison construction ($345 m out of $350 m in debt authorized but not issued).
Maybe more importantly, because $110 million of that money is ongoing, we more than doubled the size of our “buildings working rainy day fund”. It went from $87 million to $197 million.
So, after the actions we took on December 3, that leaves $521 million one-time and $565 million ongoing in available revenue.
Last year we had available new revenue equaling $101 million one-time and $382 million ongoing.
4/27/2019

8. December EAC Action Wildland Fire Suppression $20 m 1x
Firefighter Retirement $17 m 1x/$3 m ong
Outstanding Rainy Day Loans $6 m 1x
Bring Rainy Day Funds to targets $88 m 1x
Capital Improvements $21 m ong
Tourism Marketing Perf Fund $3 m ong
RESERVE FOR DOWNWARD ADJ $100 m 1x/$200 m ong
Some of you remember that one-year ago we had a discussion similar to this and decided to use a good portion of that $101 million one-time and $382 million ongoing to pay existing commitments.
We put $85 million into our rainy-day funds to repay 10-year-old debt. We fully-funded $67 million in construction of higher ed buildings that we had authorized but not funded the year before. In total, we used $89 million one-time and $90 million ongoing for these existing obligations, bringing our available revenue after caucuses last year to $12 million one-time and $292 million ongoing.
We have some of those same issues this year, and the leadership team would like your support to address those issues immediately again this year as we did last year.
This year’s issues are:
Wildland Fire Suppression - $20 million one-time
Additional Firefighter Retirement Costs - $17 m one-time and $3 m ongoing
Repayment of Rainy-day Fund Loans from FY 11 and FY 14 - $6 m one-time
Bringing Rainy-day Funds to Target Balances - $88 m one-time
Making DSU O&M Approps ongoing - $300 k ongoing
Maintaining Capital Improvements at $1.1 % - $8 m ongoing
Raise Capital Improvements to 1.2% - $12 million ongoing
Tourism Marketing Performance Fund - $3 m ongoing
This year, EAC did something else. Because we believe some of this revenue is above trend and unsustainable, we took $100 m one-time and $200 m ongoing “off the table” as allowed in our rules. If that revenue still exists in February estimates, we’ll revisit it at that time.
4/27/2019

9. December Special Session
Available Revenue
(in Millions)
One-time
Ongoing
General Fund
$67
$187
Education Fund
$579
$488
Total
$646
$675
December Special Session
Prison Construction
($125)
($110)
Balance Available
$521
$565
December EAC Action
Mandatory & Set-asides
($231)
($227)
$290
$338
After subtracting prison construction cash and what EAC did on December 10, available revenue is $290 m one-time and $338 m ongoing. That’s still considerably more than we had at this time last year.
4/27/2019

10. Building the FY 2020 Public Education Budget 2019 GS | Big Rocks, Medium Rocks, & A Few Pebbles
All Amounts Ongoing Unless Specified as One-time
Enrollment Growth - $42.0 M & $4.0 M 1x
WPU Value Increase - $32. M (each 1%)
+$4.7 M in WPU Value Rate
Rural Schools - $0.5 M to $3.0 M
Pupil Transportation - $5.0 M
USDB Utah County School - $3.0 M 1x
USBE Info. Mgt. - $5 M to $17.0 M 1x
Issues with Unknown Impact
Student Fees
Safe Schools
Teacher & Student Success Account

11. Teacher & Student Success Restricted Account 2019 GS | Current Appropriations & Potential Changes
2018 GS Actions (FY 2019)
Looking Forward (FY 2020)
Tax Rebalancing (HB 293) Appropriated $65,150,000 to the Restricted Account
$46.5 M from the Education Fund
Equivalent to 1.5% WPU Value Increase
$18.7 M from WPU Value Rate (Property Tax) Tied to WPU Value Increase
1st Year Revenue Estimate
2nd Year adds approximately $4.7 M for each 1% increase in WPU Value
Funding Appropriated 1x to LEAs on a WPU Basis (Flexible Allocation)
Ongoing Funding Still in Restricted Account
Balance May Increase Based on WPU Value Increase Approved by Legislature
2019 Legislature to Determine Final Allocation of Account Revenues to LEAs, Many Options Exist:
Original “Our Schools Now” Proposal
Move to WPU Value
Continue in Flexible Allocation
New Method

12. The Basic Rate: Tax Rebalancing Impacts
2018 General Session Changes
Property Tax All Districts Must Levy to Participate in the Basic School Program
Total Revenue (FY 19):
$462.8 Million
4 Components:
Basic Rate (Early 1970s)
Increment Rate (2015)
Equity Pupil Rate (2018)
WPU Value Rate (2018)

13. H.B. 293 Programs for Equalization and Teacher & Student Success are Supported by Local Property Tax Revenues, How?
The Basic Levy: How Increased Local Property Tax Supports Education Fund Transfers to Restricted Accounts
FY 2019
$130.0 Million from Property Tax Revenue
Restricted Accounts:
$75.0 M Minimum Basic Growth
$36.1 M Local Levy Growth
$18.7 M Teacher & Student Success

14. The Basic Levy: FY 2020 Estimates
Statute Provides for Certain Formulaic Increases in Basic Levy Property Tax Revenue
Basic Levy - $14.9 M from “Net New Growth in Properties” and used to offset the state cost of enrollment growth.
Equity Pupil - $12.8 M (Est.) from the difference between the traditional “Minimum Basic Tax Rate” and the rate floor of
WPU Value - $4.7 M (Est.) for each 1% increase in WPU Value set by the Legislature

15. Questions?